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EXHIBIT 3 <br />Judson Brown, City of Santa Ana October 27, 2022 <br />Habitat Washington Avenue — Preliminary Financial Gap Analysis Page 8 <br />SILENT SECOND MORTGAGE REVENUE CALCULATION (TABLE 4) <br />As a basic premise it must be assumed that the total of the liens accepted by a home <br />buyer cannot exceed the unrestricted market value of the home. Furthermore, based <br />on previous City homeownership projects, the City will record a second trust deed equal <br />to the difference between the defined Affordable Sales Price and the estimated market <br />value of the home. <br />KMA assumes that the City's second trust deed will be structured as a deferred payment <br />loan which are commonly known as silent second mortgages. These loans typically <br />become due and payable when the home is resold to a non -affordable home buyer. <br />KMA assumes that the City's silent second trust deed will fall second in the lien <br />hierarchy behind the conventional first trust deed mortgage. <br />The calculations used to estimate the supportable silent mortgages are presented in the <br />following sections of this analysis. <br />Market Rate Sales Prices <br />In Summer 2022, KMA conducted a survey of recent home sales comparables for the <br />Project's nearby market area for the purpose of estimated the current silent second <br />mortgage amount. Based on this survey, KMA estimates the market rate sales price for <br />an attached three -bedroom unit at $680,000. <br />Available Silent Second Mortgage Revenue <br />Based on the estimated market rate sales prices, the available silent second mortgage <br />revenue is estimated at as follows: <br />Three - <br />Bedroom Unit <br />Market Rate Sales Price $680,000 <br />(Less) Affordable Sales Price (175,500) <br />Silent Second Mortgage Amounts (Per Unit) $504,500 <br />City Council 21 — 16 12445✓2.20 <br />19090.018.026 <br />